December 2019 / Switzerland

On 18 November 2019, the State Tax Service (STS) clarified in Guidance Letter No. 806/6-99-00-05-05-01-15/IПK when transactions with Swiss residents established under certain legal forms are recognized as controlled for transfer pricing purposes. The STS clarified that, generally, a transaction should be considered as controlled and subject to transfer pricing rules if it affects the taxation of the parties and the transaction involves non-resident entities that do not pay corporate income tax, including on income received outside the state of registration of such entity, or entities that are not tax residents of the states where they are registered as legal entities. The list of jurisdiction-based legal forms of such non-resident legal entities was approved by the Cabinet of Ministers by Order No. 480 of 4 July 2017 (the Order). The list includes Swiss residents registered as Kollektivgesellshaft, Société en nom collectif, Sociétá in collectivo, Kommanditgesellshaft, Société en commandite, Societá in accomandita (LP), Einfache Gesellscaft, Société simple and Societá semplice. The STS emphasized that transactions with Swiss residents registered and established under the legal forms that are not included in the list will not be recognized as controlled if the parties are not related or the transactions are not conducted through a non-resident commissionaire. Similarly, transactions with Swiss residents will not be recognized as controlled if such entities are established under the legal forms specified in the Order and pay the corporate income tax due in the reporting year in which the relevant transactions took place, including on income received from outside Switzerland.

On 4 December 2019, the Public Revenue Authority published circular Δ.2196 providing clarifications on the exemption from withholding tax (WHT) for dividend, interest and royalty payments to companies that are resident in Switzerland. The circular clarifies that, if there is no guarantee provided to the Greek tax authorities and thus the dividend, interest and royalty payments cannot be paid WHT free (based on article 63 of the Income Tax Code), the Swiss companies are entitled to request the refund of the WHT levied following the completion of the two-year period even if the dividend, interest or royalty has been paid at a moment during which the minimum 2-year period has not been completed. As a result, the treatment of Swiss companies is the same as the treatment of an EU company receiving dividend, interest or royalty payments from a Greek company.

On 13 December 2019, the Swiss Federal Council launched a consultation on the Federal Act on the Implementation of International Tax Agreements (ITAIA). The Federal Council plans to adapt the existing law to the recent changes in international tax law. The total revision of the Federal Act of 22 June 1951 on the Implementation of International Federal Conventions on the Avoidance of Double Taxation (new version: ITAIA) is intended to ensure that tax agreements, particularly double taxation agreements, can continue to be applied easily and with legal certainty in the future. The revision of the law stipulates how mutual agreement procedures are to be carried out at national level. The defined procedure largely follows current practice and is applied only if the agreement does not contain any deviating provisions. The revision also provides for certain simplifications. Moreover, it contains the key points for withholding tax relief based on international agreements, as well as criminal provisions in connection with relief from withholding taxes on capital income. The consultation runs until 27 March 2020.